Gap and crap

Stocks jumped at the open, pushing the S&P 500 futures to a record string of opens more than 0.5% above the prior close. We saw in a premium note before the open that while not perfect, behavior like this has a strong tendency to reverse over the ensuing days. Stocks faded and the S&P closed lower for the day. There have been 7 times the futures gapped up at least 1% to at least a 30-day high then reversed to close in negative territory. Over the next 3 days, the index lost even more ground 6 of the 7 times, averaging -0.7%. By a month later, all but one were higher, though. There were 20 times it gapped up at least 0.5% to a 30-day high then reversed, with 13 of those 20 leading to more losses over the next 3 days, but a month later 14 were higher. So, reversals have had a tendency to continue short-term but not over the next month.